Firm News - Law Offices of David A. Shapiro, P.C.

The Steps Involved in Trust Administration

Posted by David Shapiro on Mar 7, 2013 9:53pm PST

Once a trust has been created, it is the responsibility of the appointed trustee to ensure that the intentions of this estate planning device are upheld. This is known as "trust administration." In this article, we will discuss the various steps of this process.

During the estate planning process, one will be afforded the opportunity to draft a trust. This legal document will dictate the manner in which their property will eventually be distributed—whether real, tangible or intangible—and appoint a trustee to carry out their expressed wishes. In essence, the trust would give the appointed trustee legal title to the property that has been incorporated in the document, but only so that they can manage the distribution of these assets to the named beneficiaries. The beneficiaries of the trust would be any person and/or organization that is entitled to use the trust assets, but these rights may be limited according to the specific terms of the document.

For example, a child of the trust's creator may be left with a substantial amount of money upon the document's administration, but the terms of the trust may ultimately limit their access to it. In some cases, it could be decided that the money will only be used for educational expenses or that the child can only have access to it when they have reached a specified age. It would then be the trustee's responsibility to ensure that these wishes are explicitly upheld. Since they are liable under a fiduciary duty—which means that they have accepted the responsibility of overseeing another person's property—they must protect the trust's assets, as well as the interests of the beneficiaries.

This subsequently means that they would be strictly prohibited from acting in a manner that interferes with the intentions of the trust. They could not, for example, knowingly put the trust's assets at risk or divert property into their own name, as this would be a direct breach of their fiduciary duties. Upon the trustor's death, meaning the person who had originally drafted the trust, the trustee would be responsible for carrying out a number of responsibilities. First, they will need to take inventory of the estate's assets and obtain a proper valuation of them. This is one of the most important steps that the trustee will need to take, as the monetary value of the assets will subsequently determine the income tax and estate tax consequences.

Depending on the complexity of the trust and the types of assets involve in the trustor's estate, the valuation process can end up being quite complicated. Since the term, "assets," encompasses both tangible and intangible items, the estate may be comprised of real property, securities, stock portfolios, investments, art, collectibles, etc. In order to make an accurate determination of these items' monetary value, the trustee would need to involve a credible expert in property and asset valuation. From there, the decided value of these assets would be documented at the time of the trustor's death, and the trustee would then be responsible for distributing the estate in the manner designated by the creator.

Carrying out the expressed wishes of a trust can be rather complicated, so it is highly recommended that you involve a Los Angeles trust administration lawyer from the Law Offices of David A. Shapiro if you have been named as a trustee. With an experienced legal professional by your side, you can ensure that your fiduciary responsibilities are upheld in the manner that the deceased had intended—which is ultimately the end-goal of this process. To learn more, contact the firm at 310-853-1554.